Applied Materials shares slump

Company introduces equipment for 0.1 micron chips

ChrisKraeuter

SAN FRANCISCO (CBS.MW) -- A 9.5 percent slide in Applied Materials shares drove the Philadelphia Semiconductor Index lower Monday after the company said its near-term outlook was cloudy.

"There is no discernible change in the current situation, whether up or down," said Applied Materials CFO Joe Bronson. "I wouldn't say whether we have or haven't achieved bottom." Also, he said the "near term is not a good situation."

The chip equipment company does not provide mid-quarter updates concerning financial conditions. The remarks were made during an investor conference in San Francisco held in conjunction with Semicon West, the largest trade show for semiconductor equipment and materials companies.

Smaller world

The company also said it had extended the capability of its chip equipment to accommodate sub-100-nanometer designs, an evolutionary step as chips continue to shrink.

Applied will begin shipping several chip-building systems integrated into a single product by the end of the year.

The new integrated products, called Process Modules, are supposed to allow chipmakers to improve chip output by synchronizing multiple pieces of equipment and processes to control, continuously monitor and communicate with each other.

"Customers can count on ramping business more effectively," said Applied Chairman and CEO Jim Morgan, in an interview with CBS.MarketWatch.com.

Applied
AMAT, +1.93%
also made the product announcement Monday at Semicon West, a trade show for chip equipment and materials companies. See full story.

While a chip built with a sub-100 nanometer (0.1 micron) design is still two or three years away, Morgan said customers can now begin to develop processes on Applied's equipment for future chip generations.

While he acknowledged that the business climate for his customers was still difficult, he said Applied is still innovating and taking the economic downturn as an opportunity to grab market share away from weaker competitors.

"This announcement says to customers that Applied will continue to provide technology leadership and this will enable them to move down and cross the 100-nanometer threshold."

Morgan said the evolution to cheaper, more powerful chips is supported by "tighter geometries, new materials, and 300mm wafers."

New materials, like higher conducting copper and more effective insulators, are currently being used, and more manufacturers are making chips on 300mm wafers, which allow more chips to be made on a single wafer.

Tighter geometries incorporate more transistors on each chip, which send data faster and with less power. Currently, chipmakers use 0.18-micron (180 nanometers) designs to build their chips. The next step is to 0.13-micron designs.

"When you work with new materials and are working on tighter geometries with more process steps, the criticality of each process gets even more significant," Morgan said, "so to get to the sub-100-nanometer level you have to have new capabilities."

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